BA hit with price-fixing fines
Updated on 01 August 2007
British Airways has been hit by two massive fines for colluding over fuel surcharges.
First the company was hit with a record penalty from the Office of Fair Trading of £121.5m.
Then the US Department of Justice imposed another £150m fine on top.
But Virgin, which blew the whistle on the cartel, won't be penalised at all. Both companies insisted passengers weren't overcharged.
BA's once-proud claim to be the gold standard in the skies has been shattered by the fines.
The OFT's investigation was prompted last year when Virgin blew the whistle, informing the authorities that it was involved in collusion with BA.
'Anti-competitive behaviour is entirely unacceptable and we condemn it unreservedly.'Willie Walsh, British Airways
British Airways fuel surcharges
The subsequent inquiry established that between August 2004 and January 2006 BA discussed with Virgin the level of surcharges on long haul flights on at least six occasions.
During that period the companies' surcharges went up from £5 to £60 to cover rising oil prices.
The rules state that companies must set surcharges independently.
Passengers 'won't pay'
British Airways has reassured passengers they won't end up paying the company's fine through increased ticket prices. In May it set aside £350m to pay penalties. But the airline is already fighting hard to re-establish trust with its customers after what it has acknowledged as one of the most challenging years it has ever faced.
Difficulties coping with new security restrictions, plus thousands of pieces of lost luggage during bad weather just some of BA's troubles.
Today the OFT said the unparallel size of the fine was entirely justified.
OFT chairman Philip Collins said: "This case, and the substantial penalty imposed, will send an important message to corporate boards and business leaders about our intention to enforce the law, and serves to remind companies of the substantial risks involved if they are found to engage in such behaviour."
It will no doubt be galling to BA that Virgin has not been punished, despite its involvement in collusion on fuel surcharges. But under the rules Virgin is exempt because it came forward to report what had been going on.
